[Analytical Perspectives]
[Dimensions of the Budget]
[20. Comparison of Actual to Estimated Totals]
[From the U.S. Government Printing Office, www.gpo.gov]


  In successive budgets, the Administration publishes several estimates 
of the surplus or deficit for a particular fiscal year. Initially, the 
year appears as an outyear projection at the end of the budget horizon. 
In each subsequent budget, the year advances in the estimating horizon 
until it becomes the ``budget year.'' One year later, the year becomes 
the ``current year'' then in progress, and the following year, it 
becomes the just-completed ``actual year.''
  The budget is legally required to compare budget year estimates of 
receipts and outlays with the subsequent actual receipts and outlays for 
that year. \1\ Part I of this chapter meets that requirement by 
comparing the actual results for 2004 with the current services 
estimates shown in the 2004 Budget published in February 2003.
---------------------------------------------------------------------------
  \1\ These requirements, for receipts and ``uncontrollable outlays,'' 
are in 31 USC 1105(a)(18) through (20).
---------------------------------------------------------------------------
  Part II of the chapter presents a broader comparison of estimates and 
actual outcomes. This part first discusses the historical record of 
budget year estimates versus actual results over the last two decades. 
Second, it broadens the focus to estimates made for each year of the 
budget horizon, extending four years beyond the budget year. This 
broader focus shows that the growth in differences between estimates and 
the eventual actual results grows as the estimates extend further into 
the future.

       PART I:  COMPARISON OF ACTUAL TO ESTIMATED TOTALS FOR 2004

  This part of the chapter compares the actual receipts, outlays, and 
deficit for 2004 with the current services estimates \2\ shown in the 
2004 Budget published in February 2003. This part also presents a more 
detailed comparison for mandatory and related programs, and reconciles 
the actual receipts, outlays, and deficit totals shown here with the 
figures for 2004 previously published by the Department of the Treasury.
---------------------------------------------------------------------------
  \2\ The current services concept is discussed in Chapter 25, ``Current 
Services Estimates.'' For mandatory programs and receipts the February 
2003 current services estimate is based on laws then in place. For 
discretionary programs the current services estimate is based on the 
current year estimates adjusted for inflation.
---------------------------------------------------------------------------

                                Receipts

  Actual receipts for 2004 were $1,880 billion, $151 billion less than 
the $2,031 billion current services estimate in the 2004 Budget 
(February 2003). As shown in Table 20-1, this shortfall was the net 
effect of legislative and administrative changes; economic conditions 
that differed from what had been expected; and technical factors that 
resulted in different collection patterns and effective tax rates than 
had been assumed. In the interest of cautious and prudent forecasting, 
the February 2003 estimate included a downward adjustment beyond what 
the economic and receipts models were forecasting. This adjustment, 
which was not distributed by source of receipt, reduced the estimate of 
2004 receipts by $15 billion.
  Policy differences. Enactment of the Jobs and Growth Tax Relief 
Reconciliation Act in May 2003 reduced 2004 receipts by $138 billion. 
This reduction was partially offset by enactment of the Pension Funding 
Equity Act in April 2004, which increased 2004 receipts by $3 billion.

          Table 20-1.  COMPARISON OF ACTUAL 2004 RECEIPTS WITH THE INITIAL CURRENT SERVICES  ESTIMATES
                                            (in billions of dollars)
----------------------------------------------------------------------------------------------------------------
                                                         Enacted
                                           February   legislation/    Different  Technical     Net
                                             2003    administrative   economic     factors    change     Actual
                                           estimate      actions     conditions
----------------------------------------------------------------------------------------------------------------
Individual income taxes.................       954          -109           -29         -7       -145        809
Corporation income taxes................       174           -26            14         27         16        189
Social insurance and retirement receipts       765             *           -23         -8        -31        733
Excise taxes............................        71   ..............         -*         -1         -1         70
Estate and gift taxes...................        24   ..............          *          1          1         25
Customs duties..........................        21            -*             *          *          *         21
Miscellaneous receipts..................        38             1            -6         -1         -6         33
Adjustment for revenue uncertainty......       -15   ..............  ..........        15         15   .........
                                         -----------------------------------------------------------------------
  Total.................................     2,031          -135           -43         27       -151      1,880
----------------------------------------------------------------------------------------------------------------
* $500 million or less.


[[Page 362]]

  Economic differences. Differences between the economic assumptions 
upon which the current services estimates were based and actual economic 
performance accounted for a reduction in 2004 receipts of $43 billion. 
Lower-than-anticipated wages and salaries and other sources of personal 
income were in large part responsible for the reductions in individual 
income taxes and social insurance and retirement receipts of $29 billion 
and $23 billion, respectively. Lower-than-expected interest rates, which 
affect deposits of earnings by the Federal Reserve, were in large part 
responsible for the $6 billion reduction in miscellaneous receipts below 
the February 2003 estimate. These reductions were only partially offset 
by a $14 billion increase in corporation income taxes, attributable to 
higher-than-expected corporate profits.
  Technical reestimates. Technical factors increased 2004 receipts a net 
$27 billion above the February 2003 current services estimate. This net 
increase was primarily attributable to higher-than-anticipated 
collections of corporation income taxes of $27 billion, which were 
partially offset by lower-than-anticipated collections of other sources 
of receipts (net of the adjustment for revenue uncertainty) of $1 
billion. Different collection patterns and effective tax rates than 
assumed in February 2003 were primarily responsible for the higher-than-
anticipated collections of corporation income taxes. Lower-than 
anticipated collections in other sources of receipts were in large part 
captured by the adjustment for revenue uncertainty, resulting in a net 
reduction in collections from these sources of receipts of $1 billion.

                                 Outlays

  Outlays for 2004 were $2,292 billion, $103 billion more than the 
$2,189 billion current services estimate in the 2004 Budget (February 
2003).
  Table 20-2 distributes the $103 billion net increase in outlays among 
discretionary and mandatory programs and net interest. \3\ The table 
also makes rough estimates according to three reasons for the changes: 
policy; economic conditions; and technical estimating differences, a 
residual.
---------------------------------------------------------------------------
  \3\ Discretionary programs are controlled by annual appropriations, 
while mandatory programs are generally controlled by authorizing 
legislation. Mandatory programs are mostly formula benefit or 
entitlement programs with permanent spending authority that depend on 
eligibility criteria, benefit levels, and other factors.
---------------------------------------------------------------------------

                                     

           Table 20-2.  COMPARISON OF ACTUAL 2004 OUTLAYS WITH THE INITIAL CURRENT SERVICES ESTIMATES
                                              (outlays in billions)
----------------------------------------------------------------------------------------------------------------
                                                     Current                   Changes
                                                     Services -----------------------------------------
                                                      (Feb.                                     Total    Actual
                                                      2003)     Policy   Economic  Technical   changes
----------------------------------------------------------------------------------------------------------------
Discretionary:
  Defense.........................................        383        63  ........          8        71       454
  Nondefense......................................        412        42  ........        -12        29       441
    Subtotal, discretionary.......................        795       105  ........         -5       100       895
 
Mandatory:
  Social Security.................................        493  ........         *         -2        -1       492
  Other programs..................................        728        27         1        -11        17       745
    Subtotal, mandatory...........................      1,221        27         1        -13        15     1,237
 
Net interest......................................        173         4       -22          5       -13       160
 
    Total outlays.................................      2,189       136       -21        -13       103     2,292
----------------------------------------------------------------------------------------------------------------
* $500 million or less.

  Policy changes are the result of legislative actions that change 
spending levels, primarily through higher or lower appropriations or 
changes in authorizing legislation, which may reflect responses to 
changed economic conditions. For 2004, policy changes increased outlays 
an estimated $136 billion relative to the initial current services 
estimates.
  Policy changes increased discretionary outlays by $105 billion. 
Defense discretionary outlays increased by $63 billion and nondefense 
discretionary outlays increased by $42 billion. A significant portion of 
both defense and nondefense outlay increases resulted from enactment of 
the Emergency Wartime Supplemental Appropriations Acts in 2003 and 2004. 
Policy changes increased mandatory outlays by $27 billion above current 
law. Medicare outlays increased an estimated $11 billion, largely due to 
the Prescription Drug and Medicare Improvement Act of 2003. In addition, 
outlays for temporary state fiscal relief increased by another $11 
billion--$6 billion for Medicaid and $5 billion for state fiscal 
assistance grants--resulting from enactment of the Jobs and Growth Tax 
Relief Reconciliation Act of 2003. The remaining $5 billion increase 
largely consists of unemployment compensation outlays resulting from 
extensions of temporary extended unemployment benefits. Debt service 
costs increased by $4 billion due to outlay and revenue policy changes.

          Table 20-3.  COMPARISON OF THE ACTUAL 2004 DEFICIT WITH THE INITIAL CURRENT SERVICES ESTIMATE
                                                  (in billions)
----------------------------------------------------------------------------------------------------------------
                                                      Current                  Changes
                                                     Services -----------------------------------------
                                                       (Feb.                                    Total    Actual
                                                       2003)    Policy   Economic  Technical   changes
----------------------------------------------------------------------------------------------------------------
Receipts...........................................     2,031      -135       -43         27      -151     1,880
Outlays............................................     2,189       136       -21        -13       103     2,292
                                                    ------------------------------------------------------------
  Deficit..........................................       158       271        22        -39       254       412
----------------------------------------------------------------------------------------------------------------
Note: Deficit changes are outlays minus receipts. For these changes, a plus indicates
an increase in the deficit.

  Economic conditions that differed from those forecast in February 2003 
resulted in a net decrease in outlays of $21 billion. This decrease 
consists almost entirely of a $22 billion decrease in net interest due 
to lower-than-expected interest rates.

[[Page 363]]

  Technical estimating differences and other changes resulted in a net 
decrease in outlays of $13 billion. Technical changes result from 
changes in such factors as the number of beneficiaries for entitlement 
programs, crop conditions, or other factors not associated with policy 
changes or economic conditions. Outlays for discretionary programs 
decreased an estimated $5 billion, due to slower-than-expected outlays 
for nondefense programs. Outlays for mandatory programs decreased an 
estimated $13 billion. This largely reflects lower-than-anticipated 
outlays for Medicaid, farm subsidy programs, and unemployment 
compensation, partially offset by higher-than-anticipated outlays for 
mortgage credit programs and Medicare. Net interest outlays increased by 
$5 billion largely due to technical factors compared to the February 
2003 estimates.

  Table 20-4.  COMPARISON OF ACTUAL AND ESTIMATED OUTLAYS FOR MANDATORY AND RELATED PROGRAMS UNDER CURRENT LAW
                                            (in billions of dollars)
----------------------------------------------------------------------------------------------------------------
                                                                                          2004
                                                                       -----------------------------------------
                                                                          Feb. 2003
                                                                          estimate       Actual        Change
----------------------------------------------------------------------------------------------------------------
Mandatory outlays:
  Human resources programs:
    Education, training, employment, and social services..............        10            13             3
    Health:
      Medicaid........................................................       177           176            -1
      Other...........................................................        18            16            -1
                                                                       -----------------------------------------
      Total health....................................................       194           192            -2
    Medicare..........................................................       249           265            16
    Income security:
      Retirement and disability.......................................        95            95            -*
      Unemployment compensation.......................................        40            42             2
      Food and nutrition assistance...................................        38            41             3
      Other...........................................................        99           103             4
                                                                       -----------------------------------------
        Total, income security........................................       273           281             8
    Social security...................................................       493           492            -1
    Veterans benefits and services:
      Income security for veterans....................................        32            31            -1
      Other...........................................................         3             *            -2
                                                                       -----------------------------------------
        Total veterans benefits and services..........................        34            31            -3
                                                                       -----------------------------------------
        Total mandatory human resources programs......................     1,253         1,273            20
                                                                       -----------------------------------------
  Other functions:
    Agriculture.......................................................        15            10            -5
    International.....................................................        -2            -7            -4
    Deposit insurance.................................................        -1            -2            -1
    Other functions...................................................        13            21             8
                                                                       -----------------------------------------
        Total, other functions........................................        24            22            -2
                                                                       -----------------------------------------
  Undistributed offsetting receipts:
    Employer share, employee retirement...............................       -52           -53            -1
    Rents and royalties on the outer continental shelf................        -4            -5            -1
    Other undistributed offsetting receipts...........................        -*      ............         *
                                                                       -----------------------------------------
        Total undistributed offsetting receipts.......................       -56           -59            -2
                                                                       -----------------------------------------
      Total, mandatory................................................     1,221         1,237            15
                                                                       -----------------------------------------
Net interest:
  Interest on Treasury debt securities (gross)........................       349           322           -28
  Interest received by trust funds....................................      -164          -154            10
  Other interest......................................................       -12            -7             4
                                                                       -----------------------------------------
        Total net interest............................................       173           160           -13
                                                                       -----------------------------------------
        Total outlays for mandatory and net interest..................     1,394         1,397             2
----------------------------------------------------------------------------------------------------------------
* $500 million or less.


                              Table 20-5.  RECONCILIATION OF FINAL AMOUNTS FOR 2004
                                            (in millions of dollars)
----------------------------------------------------------------------------------------------------------------
                                                                     Receipts         Outlays         Deficit
----------------------------------------------------------------------------------------------------------------
Totals published by Treasury (September 30 MTS).................       1,879,799       2,292,352        -412,553
  Miscellaneous Treasury adjustments............................             -22            -291             269
                                                                 -----------------------------------------------
Totals published by Treasury in Combined Statement..............       1,879,777       2,292,061        -412,284
 
  National Railroad Retirement Investment Trust.................  ..............            -231             231
  Exchange stabilization fund...................................  ..............             140            -140
  Public Company Accounting Oversight Board.....................             119              68              51
  Standard Setting Body.........................................              38              38  ..............
  United Mine Workers of America benefit funds..................             127             127  ..............
  Other.........................................................              10              12              -2
                                                                 -----------------------------------------------
 
  Total adjustments, net........................................             294             154             140
 
Totals in the budget............................................       1,880,071       2,292,215        -412,144
 
MEMORANDUM:
  Total change since year-end statement.........................             272            -137             409
----------------------------------------------------------------------------------------------------------------

                                 Deficit

  The preceding two sections discussed the differences between the 
initial current services estimates and the actual amounts of Federal 
Government receipts and outlays for 2004. This section combines these 
effects to show the net impact of these differences.
  As shown in Table 20-3, the 2004 current services deficit was 
initially estimated to be $158 billion. The actual deficit was $412 
billion, which was a $254 billion increase from the initial estimate. 
Receipts were $151 billion less than the initial estimate and outlays 
were $103 billion more. The table shows the distribution of the changes 
according to the categories in the preceding two sections.
  The net effect of policy changes for receipts and outlays increased 
the deficit by $271 billion. Economic conditions that differed from the 
initial assumptions in February 2003 accounted for an estimated $22 
billion increase in the deficit. Technical factors reduced the deficit 
by an estimated $39 billion.

Comparison of the Actual and Estimated Outlays for Mandatory and Related 
                            Programs for 2004

  This section compares the original 2004 outlay estimates for mandatory 
and related programs under current law in the 2004 Budget (February 
2003) with the actual outlays. Major examples of these programs include 
Social Security and Medicare benefits for the elderly, agricultural 
price support payments to farmers, and deposit insurance for banks and 
thrift institutions. This category also includes net interest outlays 
and undistributed offsetting receipts.
  A number of factors may cause differences between the amounts 
estimated in the budget and the actual mandatory outlays. For example, 
legislation may change benefit rates or coverage; the actual number of 
beneficiaries may differ from the number estimated; or economic 
conditions (such as inflation or interest rates) may differ from what 
was assumed in making the original estimates.
  Table 20-4 shows the differences between the actual outlays for these 
programs in 2004 and the amounts originally estimated in the 2004 
Budget, based on laws in effect at that time. Actual outlays for 
mandatory spending and net interest in 2004 were $1,397 billion, which 
was $2 billion more than the initial estimate of $1,394 billion, based 
on existing law in February 2003.
  Actual outlays for mandatory human resources programs were $1,273 
billion, $20 billion more than originally estimated. This increase was 
the net effect of legislative action, differences between actual and 
assumed economic conditions, differences between the anticipated and 
actual number of beneficiaries, and other technical differences. Outlays 
for other functions were $2 billion less than originally estimated. 
Undistributed offsetting receipts were $2 billion higher than expected.
  Outlays for net interest were $160 billion or $13 billion less than 
the original estimate. This decrease was the net effect of changes in 
interest rates from those initially assumed, changes in borrowing 
requirements due to differences in surpluses, and technical factors.

  Reconciliation of Differences with Amounts Published by Treasury for 
                                  2004

  Table 20-5 provides a reconciliation of the receipts, outlays, and 
deficit totals published by the Department of the Treasury in the 
September 2004 Monthly Treasury Statement and those published in this 
budget. The Department of the Treasury made adjustments to the estimates 
for the Combined Statement of Receipts, Outlays, and Balances, which 
decreased receipts and outlays by $22 million and $291 million, 
respectively. Additional adjustments for this budget increased receipts 
by $294 million and outlays by $154 million. Several financial 
transactions that are not reported to the Department of the Treasury, 
including those for the Public Company Accounting Oversight Board, the 
receipt of

[[Page 364]]

accounting oversight fees and their payment to the Standard Setting 
Body, and the United Mine Workers of America benefit funds, are included 
in the budget. Other significant conceptual differences in reporting are 
for the National Railroad Retirement Investment Trust (NRRIT) and the 
Exchange Stabilization Fund. Reporting to the Department of the Treasury 
for NRRIT is done with a one month lag, so that the fiscal year total 
provided in the Treasury Combined Statement covers September 2003 
through August 2004. The budget has been adjusted to reflect 
transactions that occurred during the actual fiscal year, which begins 
in October. For the Exchange Stabilization Fund, reporting for the 
budget excludes the gains and losses in the valuation of foreign 
currencies held in the fund.

[[Page 365]]

  Part II:  HISTORICAL COMPARISON OF ACTUAL TO ESTIMATED SURPLUSES OR 
                                DEFICITS

  This part of the chapter compares estimated surpluses or deficits to 
actual outcomes over the last two decades. The first section compares 
the estimate for the budget year of each budget with the subsequent 
actual result. The second section extends the comparison to the 
estimated surpluses or deficits for each year of the budget window: that 
is, for the current year through the fourth year following the budget 
year. This part concludes with some observations on the historical 
record of estimates of the surplus or deficit versus the subsequent 
actual outcomes.

Historical Comparison of Actual to Estimated Results for the Budget Year

  Table 20-6 compares the estimated and actual surpluses or deficits 
since the deficit estimated for 1982 in the 1982 Budget. The estimated 
surpluses or deficits here for each budget include the Administration's 
policy proposals. Therefore, the original deficit estimate for 2004 
differs from that shown in Table 20-3, which is on a current services 
basis. Earlier comparisons of actual and estimated surpluses or deficits 
were on a policy basis, so for consistency the figures in Table 20-6 are 
on this basis.

                Table 20-6.  COMPARISON OF ESTIMATED AND ACTUAL SURPLUSES OR DEFICITS SINCE 1982
                                            (In billions of dollars)
----------------------------------------------------------------------------------------------------------------
                                              Surplus          Differences due to
                                            or deficit ----------------------------------
                                                (-)                                                     Actual
                 Budget                      estimated                                       Total    surplus or
                                                for       Enacted    Economic  Technical  difference   deficit(-
                                              budget    legislation   factors    factors                   )
                                             year \1\
----------------------------------------------------------------------------------------------------------------
 
1982......................................         -62          15        -70        -11        -66        -128
1983......................................        -107         -12        -67        -22       -101        -208
1984......................................        -203         -21         38         -0         17        -185
1985......................................        -195         -12        -17         12        -17        -212
1986......................................        -180          -8        -27         -7        -41        -221
1987......................................        -144           2        -16          8         -6        -150
1988......................................        -111          -9        -19        -16        -44        -155
1989......................................        -130         -22         10        -11        -23        -153
1990......................................         -91         -21        -31        -79       -131        -221
1991......................................         -63          21        -85       -143       -206        -269
1992......................................        -281         -36        -21         48         -9        -290
1993......................................        -350          -8        -13        115         95        -255
1994......................................        -264          -8         16         52         61        -203
1995......................................        -165         -18          1         18          1        -164
1996......................................        -197           6         53         30         89        -107
1997......................................        -140           1         -4        121        118         -22
1998......................................        -121          -9         48        151        190          69
1999......................................          10         -22         56         82        116         126
2000......................................         117         -42         88         73        119         236
2001......................................         184        -129         32         41        -56         128
2002......................................         231        -104       -201        -84       -389        -158
2003......................................         -80         -86        -34       -177       -297        -378
2004......................................        -307        -122        -22         39       -105        -412
 
Average...................................  ..........         -28        -12         10        -30   ..........
Absolute average \2\......................  ..........          32         42         58        100   ..........
Standard deviation........................  ..........          42         59         79        137   ..........
----------------------------------------------------------------------------------------------------------------
\1\ Surplus or deficit estimate includes the effect of the budget's policy proposals.
\2\ Absolute average is the average without regard to sign.

  On average, the estimates for the budget year underestimated actual 
deficits (or overestimated actual surpluses) by $30 billion over the 23-
year period. Policy outcomes that differed from the original proposals 
increased the deficit by an average of $28 billion. Differences between 
economic assumptions and actual economic performance increased the 
deficit an average of $12 billion. Differences due to these two factors 
were partly offset by technical revisions, which reduced the deficit an 
average of $10 billion.
  The relatively small average difference between actual and estimated 
deficits conceals a wide variation in the differences from budget to 
budget. The differences ranged from a $389 billion underestimate of the 
deficit to a $190 billion overestimate. The $389 billion underestimate, 
in the 2002 Budget, was due largely to receipt shortfalls associated 
with the 2001 recession and associated weak stock market performance. 
About a quarter of the underestimate was due to increased spending for 
recovery from the September 11, 2001 terrorist attacks, homeland 
security measures, and the war against terror, along with lower receipts 
due to the March 2002 economic stimulus act. The $190 billion 
overestimate of the deficit in the 1998 Budget stemmed largely from 
stronger-than-expected economic growth and a surge in individual income 
tax collections beyond that accounted for by economic factors.
  Because the average deficit difference obscures the degree of under- 
and overestimation in the historical data, a more appropriate statistic 
to measure the magnitude of the differences is the average absolute 
difference. This statistic measures the difference without regard to 
whether it was an under- or overestimate. Since 1982, the average 
absolute difference has been $100 billion.
  Another measure of variability is the standard deviation. This 
statistic measures the dispersion of the data around the average value. 
The standard deviation of the deficit differences since 1982 is $137 
billion. Like the average absolute difference, this measure illustrates 
the high degree of variation in the difference between estimates and 
actual deficits.
  The large variability in errors in estimates of the surplus or deficit 
for the budget year underscores the inherent uncertainties in estimating 
the future path of the Federal budget. Some estimating errors are 
unavoidable, because of differences between the President's original 
budget proposals and the legislation that Congress actually enacts. 
Occasionally such differences are huge, such as additional 
appropriations for disaster recovery, homeland security, and war efforts 
in response to the terrorist attacks of September 11, 2001, which were 
obviously not envisioned in the President's

[[Page 366]]

budget submitted the previous February. Even aside from differences in 
policy outcomes, errors in budget estimates can arise from new economic 
developments, unexpected changes in program costs, shifts in taxpayer 
behavior, and other factors. The budget impact of changes in economic 
assumptions is discussed further in Chapter 12 of this volume, 
``Economic Assumptions.''

    Five-Year Comparison of Actual to Estimated Surpluses or Deficits

  The substantial differences between actual surpluses or deficits and 
the budget year estimates made less than two years earlier raises 
questions about the degree of variability for estimates of years beyond 
the budget year. Table 20-7 shows the summary statistics for the 
differences for the current year (CY), budget year (BY), and the four 
succeeding years (BY+1 through BY+4). These are the years that are 
required to be estimated in the budget by the Budget Enforcement Act of 
1990.


Table 20-7.  DIFFERENCES BETWEEN ESTIMATED AND ACTUAL SURPLUSES OR DEFICITS FOR FIVE-YEAR BUDGET ESTIMATES SINCE
                                                      1982
                                            (In billions of dollars)
----------------------------------------------------------------------------------------------------------------
                                                                             Estimate for budget year plus
                                                 Current     Budget  -------------------------------------------
                                                   year       year                            Three       Four
                                                 estimate   estimate   One year  Two years    years      years
                                                                        (BY+1)     (BY+2)     (BY+3)     (BY+4)
----------------------------------------------------------------------------------------------------------------
Average difference \1\........................         16        -30        -65        -86        -95        -99
Average absolute difference \2\...............         51        100        156        201        223        240
Standard deviation............................         64        137        210        253        258        271
----------------------------------------------------------------------------------------------------------------
\1\ A positive figure represents an underestimate of the surplus or an overestimate of the deficit.
\2\ Average absolute difference is the average difference without regard to sign.

  On average, the budget estimates since 1982 overstated the deficit in 
the current year by $16 billion, but underestimated the deficit in the 
budget year by $30 billion. The budget estimates understated the deficit 
in the years following, by amounts growing from $65 billion for BY+1 to 
$99 billion for BY+4. While these results suggest a tendency to 
underestimate defi

[[Page 367]]

cits toward the end of the budget horizon, the averages are not 
statistically different from zero in light of the high variation in the 
data.
  The average absolute difference between estimated and actual deficits 
grows dramatically over the six years from CY through BY+4, from $51 
billion in the current year to $100 billion for the budget year, to $240 
billion for BY+4. While under- and overestimates of the deficit have 
historically tended to average out, the absolute size of the under- or 
overestimates grows as the estimates extend further into the future. The 
standard deviation of the deficit differences shows the same pattern. 
The standard deviation grows from $64 billion for current year estimates 
to $137 billion for the budget year estimates and continues to increase 
steadily as the estimates extend further out, reaching $271 billion for 
BY+4.
  The estimates of variability in the difference between estimated and 
actual deficits can be used to construct a range of uncertainty around a 
given set of estimates. Statistically, if these differences are normally 
distributed, the actual deficit will be within a range of two standard 
deviations above or below the estimate about 90 percent of the time. 
Chart 20-1 shows this range of uncertainty applied to the deficit 
estimates in this budget. This chart illustrates that unforeseen 
economic developments, policy outcomes, or other factors could give rise 
to large swings in the deficit estimates.